Meck Executive Summary

Some pharmaceutical companies are feeling grief from a decline in research slump but the issues are more serious in reference to the United States intellectual property laws on which these same companies need to inflate their profits. Maybe the focus should be on an idea that came about several years ago. Give drug patents a shorter term of 15 years but don’t start the clock until the FDA approves the drug.

The agreement states Pharmagen will receive up to $500 million funding for R&D costs as they are incurred solely for the research efforts of a potential new drug “X”

Extremely risky drug discovery and development, lengthening development times which increase development cost, return on investments, and generic competitors.

The second rests in Pfizer’s expiring patents on several popular drugs that invite their competitors to enter the market with similarly performing pharmaceuticals. Once these patents expire, Pfizer will either have to extend the patent through reformulating the performance of the drug for another purpose called “ever greening”, or abandon the line in the pursuit of another, more profitable product. Regardless of what they do in terms of their own product offerings, generic imitations of their products will enter the market, diluting the profitability of the drug and forcing reliance on the sales of other existing products to make up the loss.

Pharmaceutical companies also defend the costs because of the patent laws. When a patent expires, a generic drug can be made and sold for lower cost. "Although

Evidently, both the EU and the U.S. enacted special provisions legislative, which extended the pharmaceuticals patents' life. As is the case with America, the Waxman-Hatch Act increased the copyright protection based on name-brand drugs with up to five years, but still it also puts

In recent years, it has become an increasingly popular practice for drug companies to perform their clinical testing of new drugs in foreign countries that might not have the consumer protections or product liability laws present in the United States.

If competitor could immediately copy a new drug the long and high cost development process would be less attractive. In order to encourage drug manufactures to have active R&D, prescription drugs are protected by patents (lasting anywhere from 10-14 years based on the contract). These patents create a monopoly for that drug and ultimately the one for the company that produces it.

1. Masters must decide whether to approve a market test of the new products to a limited cross-section of drug and food-and-drug stores. The estimated cost of the test is $30,000, along with a $10,000 supplier set-up charge. A 20,000 unit minimum order for each package size is also required. Estimated total cost of the test market is as follows:

In application, people might view Merck’s duties in different ways. For example, one might argue that as a company Merck only has responsibilities to release effective and safe medications and to make a profit to stay in business. On the other hand, it could be argued that as a pharmaceutical company Merck has special obligations to follow leads (like ivermectin) because they may greatly benefit human beings or save lives despite being unprofitable.

Since its humble beginning as a small drugstore, Merck has placed a large amount of importance on improving the health and well-being of its customers. As drug patents expire and genetic forms of their top products become available, Merck’s strategy is to do the unexpected; instead of raising the price of their older products in favor of patent protected new drugs, Merck focuses on reducing their cost in order to better compete with their generic counterparts. Additionally, Merck’s plan for growth now encompasses a much more aggressive pursuit of new drugs in their pipeline through extensive research. Merck became the second largest health care company in the world after the merger with Schering-Plough in 2009 and has

Moreover, generic drugs manufacturers sometimes start production of patent-protected drug analogues even before a patent expires. Although research-oriented companies in many cases are able to protect their patents, they do suffer from lost revenues.

Based on our analysis, the value of this license is $13.98 million so we recommend that Merck agrees to accept the agreement but for a bid price up to that amount. We also suggest that Merck consider another option, which is to eliminate the license fee ($5 million, $2.5 million and $10-$40 million in Phase I, II and III respectively) and instead, pay Merck a royalty fee on any sales of the drug. Under the current agreement, Merck bears all the risk while LAB bears none. Even if the drug fails FDA approval, Merck would still need to pay an expected $9.8 billion in licensing fees to LAB in addition to all the costs for FDA testing. Instead, Merck should consider removing all licensing fees and only offer a royalty. This way, both LAB and Merck would have a strong incentive to seeing that the drug passes FDA testing. In that case, Merck should offer a royalty of 9.03% to LAB, which will give LAB an expected $9.8m in royalty. Without the licensing fee, Merck can offer up to 21% royalty fee (Appendix 4). The sensitivity analysis in Appendix 4 provides a benchmark for Merck to negotiate with LAB (no higher royalty fee than 21% without licensing and maximum of 12% with the licensing fee of $9.8m as in the current situation).

Ratios aside, the patent of its older product (mainly Zyprexa) will expire in 2011. However, the increased in the newer products that accounts for total sales has increased to 24% from 18% in

In the late 1970s, Merck was falling off a 10-year dry season as far as new items. For about 10 years, the organization had depended on two physician endorsed drugs for a critical rate of its around $2 billion in yearly deals: Indocin, a treatment for rheumatoid joint inflammation, and Aldomet, a treatment for hypertension. Henry W. Gadsden, Merck's CEO from 1965 to 1976, alongside his successor, John J. Horan, were worried that the 17-year patent security on Merck's two major moneymakers would soon terminate, and started putting a tremendous sum in research.